What kinds of account do I need if I would like to invest in listed renminbi-denominated products?
Renminbi bank account
You will need a renminbi bank account in Hong Kong and also sufficient renminbi for trading the product. The renminbi bank account can be used for IPO subscription, depositing refund cheque, dividend distribution and settling renminbi payment for any subsequent trading on the Stock Exchange of Hong Kong Ltd (SEHK) in the secondary market etc. Under the current regulations, only Hong Kong SAR residents with Hong Kong SAR identity cards may open personal renminbi bank accounts in Hong Kong. You should be aware of the lead time required for opening renminbi bank accounts and requesting renminbi cheque book as the banks may not be able to process your request immediately.
What you need is a stock dealing account with an intermediary (e.g. brokerages, banks). Normally, you do not need to set up a separate brokerage account specific for dealing in listed renminbi-denominated securities, but it is more prudent to check with your intermediary. It is also advisable to double check with your intermediary whether there are specific terms, such as settlement procedures and risk disclosure related to listed renminbi-denominated securities trading.
In addition, you should confirm readiness of your intermediary to carry out renminbi securities business by asking them directly.
Investor Participant Account
If you are going to use your Investor Participant Account (IP Account) opened with HKSCC to settle trades in listed renminbi-denominated securities, you should make sure you have set up an RMB Designated Bank Account with the Central Clearing and Settlement System (CCASS).
Is renminbi freely convertible in Hong Kong?
There is no limit on the amount of renminbi that can be purchased or sold by individuals and companies with banks in Hong Kong.
How can I invest in listed renminbi-denominated securities?
Investors may invest in listed renminbi-denominated securities through its Initial Public Offering (IPO) or trading on the SEHK after it is listed on the SEHK. For both IPO and trading on the SEHK, investors should have opened an RMB bank account for settlement purpose.
Can I get renminbi margin financing from intermediaries?
Although it is common for investors to get margin financing in HKD for HKD denominated IPO, under the current agreement between banks and the Clearing Bank for RMB Business in Hong Kong, banks are not permitted to provide RMB lending to personal customers.
For non-bank financial institutions, such as brokerages, such restriction will not be applicable but whether brokerage would provide financing services or finance individual customer is a commercial decision of the brokerage. Investors should check with your brokerages on the availability of renminbi margin financing and the detailed arrangements. If no such financing will be available from brokerages, then investors need to have sufficient renminbi funds to settle the transactions.
How can I subscribe listed renminbi-denominated securities through an IPO?
The IPO for different listed renminbi-denominated securities may have different subscription channels. In general, you can submit your applications through either one of these channels:
- Physical white forms (via receiving banks) - you can complete the white application form and attach payment in the form of either renminbi cheques (note that some banks may impose restrictions as mentioned earlier) or renminbi cashier orders. Any units allocated will be registered in your own name.
- Physical yellow forms (via intermediaries) - you can submit the yellow application form to your intermediary [Important Note] to apply on your behalf. You should confirm with the brokerage about the details of fees and charges, such as types, currency and amount. Any units allocated will be deposited into the intermediary's CCASS account.
- White forms eIPO (via the service provider specified in the prospectus) - you can submit an application through the designated website as specified in the prospectus. Payment will be made via internet banking service provided by the banks specified on the designated website. Investors should have a renminbi bank account with one of these banks. Any units allocated will be registered in your own name.
- CCASS EIPO (via CCASS) - if you have an Investor Participant Account with CCASS (IP Account), you may instruct HKSCC via the CCASS Phone System or CCASS Internet System to cause HKSCC Nominees to apply for units on your behalf. Any units allocated will be registered in the name of HKSCC Nominees Ltd.
IMPORTANT NOTE: If you apply via your intermediary to apply on your behalf, or intend to sell physical share certificates registered under your own name in the future, you should confirm readiness of your intermediary to carry out renminbi securities business by asking them directly.
Furthermore, if you apply using a yellow form, please ensure the red box at the end of the form contains the CCASS Participant ID of an intermediary named in the relevant list as published at 9:00 am on the IPO closing date, otherwise, the application will be rejected.
Fees and payment
For IPO application, please note that you will have to pay for the number of units subscribed, plus the SFC levy, SEHK trading fee and brokerage commission in renminbi.
For payment made by renminbi cheques or renminbi cashier orders, you should be aware of the lead time required for requesting renminbi cheque book from bank and the availability of renminbi cashier order services.
If you choose to submit your application through White Form eIPO, you should have maintained both a renminbi bank account and internet banking service with one of the banks specified by the White Form eIPO service provider to settle the relevant payment.
If you are a CCASS Investor Participant and wish to subscribe through this account, please make sure you have set up an RMB Designated Bank Account with CCASS for settling the payment.
After the IPO result is announced
In case of partial or unsuccessful allotment, depending on your IPO application channel, you will receive refund from either the share registrar or your intermediary. You can deposit the refund in your renminbi bank account.
What transaction costs are involved in listed renminbi-denominated securities trading?
Just like any stock transactions, secondary trading of listed renminbi-denominated securities are subject to brokerage commission, stamp duty, SFC levy, SEHK trading fee, and other fees and charges. Currently stamp duty, SFC levy and SEHK trading fee on purchases and sales of listed renminbi-denominated securities are to be paid by intermediaries to the HKEx in HK dollar, based on an exchange rate determined by the Hong Kong Monetary Authority on the day of the trade. The exchange rates are published on the HKEx website by 11 am on each trading date. Check with your intermediaries on details of all fees related to listed renminbi-denominated securities trading (e.g. custody fees, scrip fee, dividend collection fees, etc), payment process including the currency that you should use for settling such fees and how they set the exchange rate to be used if any currency conversion is required during the transaction.
How to calculate stamp duty for non-HKD listed products?
The stamp duty rate is 0.1% of the amount of the consideration or of its value on every sold note and every bought note. For stamp duty purposes, if the consideration is in a currency other than HK dollar, it should be converted into Hong Kong dollars by using the rate of exchange determined by the Hong Kong Monetary Authority.
Purchase of 10,000 XYZ shares @RMB 12.52 on T day
Exchange rate: 1.176 for T day
Step 1: Consideration in HK$ equivalent:
10,000 x RMB12.52 x 1.176 = HK$147,235.20
Step 2: Stamp duty in HK$:
HK$147,235.20 x 0.1% = HK$148 (round up to the nearest $)
(Source: Inland Revenue Department)
How can I find the rate of exchange for calculating the stamp duty?
To facilitate the calculation of stamp duty to be paid through the SEHK for transactions in RMB and USD, the exchange rates for each trading day are made available on the HKEx website by 11:00 am or earlier on that day.
You may check the exchange rates at HKEx website.
(Source: Inland Revenue Department)
How will my trading of listed renminbi-denominated securities be settled?
You should check with your brokerage about the payment method (for example, by cheque or electronic transfer) for your listed renminbi-denominated securities investment, and check with your bank with which you maintain your renminbi bank account whether they can support such a payment method and if any restrictions will be applied to fund transfer to third party account.
If my renminbi account does not have sufficient amount to settle the transaction, will my intermediary charge my Hong Kong Dollar account to cover the shortfall?
Please check with your intermediary on details regarding settlement methods for listed renminbi-denominated securities related transactions and their policy on settlement defaults by customers. You should watch out that if you default in settlement of a purchase or sale of listed renminbi-denominated securities, you may be liable to compensate the intermediary for any losses caused by or arising from the default, such as any exchange loss suffered by the intermediary in settling the transaction for you.
If you are using the Renminbi Equity Trading Support Facility (TSF) provided by the Hong Kong Exchanges and Clearing Limited to buy renminbi-traded shares, exchange traded funds (ETFs) with equities as underlying or real estate investment trusts (REITs) in the secondary market with HK dollars, you should note that only HK dollar is accepted for the purchase of eligible renminbi securities and only HK dollar is allowed to be paid as sale proceeds for the sale of those renminbi securities. You should check with your brokerages or banks the relevant terms, fees, operation flow and agreement that need to be signed for using the TSF.
For details about the TSF arrangement and the list of securities supported by the TSF, please refer to HKEx's website.
In terms of transaction documents, is there any difference in trading listed renminbi-denominated securities compared to other stocks?
Intermediary should follow the same set of rules in preparing trading documents such as contract note, statement of account, etc, for the trades of renminbi-denominated securities as in the case of other equity products listed on the SEHK. You should contact your intermediary if you have any questions about the information disclosed in the trading documents.
If I invest in listed renminbi-denominated securities, does it mean that I will always receive renminbi upon sale of my investments?
Currently, trading of listed renminbi-denominated securities on SEHK would be cleared in RMB through CCASS, so you would expect to receive renminbi when you sell listed renminbi-denominated securities through the SEHK.
How are dividends paid?
Dividends of listed renminbi-denominated securities may be paid in renminbi or other currencies. Due to the exchange controls and restrictions applicable to renminbi, the product issuer may not always be able to obtain sufficient amounts of renminbi in a timely manner to pay dividends in renminbi. As a result, dividends may be paid in currencies other than renminbi.
Can I convert renminbi sale proceeds into Hong Kong dollar with my intermediary?
If you want to convert renminbi sale proceeds into other currency with your intermediary, you should check with them whether they would provide such service to you. It is entirely a commercial decision of the intermediary whether to provide such service to their customers. You should also carefully study the terms of the service, exchange rate and any related charges before agreeing to use such service.